Guarantees Are Going Up

The New York Times has a thoroughly self-evident story on the return of auction house guarantees. And though Graham Bowley at least gets it right by pointing out that guarantees are a means to increase margins, the story misses the fundamental role of guarantees in the marketplace. They exist to motivate reluctant sellers.

There’s a secondary issue that we’ll try to address shortly, the misconception in the press that auction guarantees artificially inflate prices.

But last fall, Sotheby’s pledged to cover minimum prices on works that made up 43 percent of the $422 million in revenue at its November Impressionist and Modern art sale, typically one of its highest-grossing auctions of the year. Christie’s has moved in the same direction. At its postwar and contemporary art sale in November, it directly guaranteed 23 lots that accounted for 44 percent of the sale’s $853 million in revenue.

Notice how the paragraph above compares Imp-Mod at Sotheby’s to Contemporary at Christie’s. Then look at the charts the Times made above. Do those numbers seem low to you? And why skip the odd years?

Update: After a brief discussion on Twitter, the author pointed out (and the charts have been annotated to reflect this) that these two charts merely compare the November Contemporary art sales. It would be interesting to see the numbers for 2011 and 2013. It would be more interesting to see a comparison of guarantees across all categories.